Is A Real Estate Rebate Legal in Florida?
Most real estate agents and brokerages have been finding innovative new ways to incentivize buyers to purchase a home. Under Florida real estate law, agents can provide broker incentives to buyers through a commission rebate. This allows buyers to save thousands of dollars by sharing brokerage compensation.
The key is finding local brokerages that offer a commission rebate or broker incentive programs, allowing you to save thousands on your next home purchase. In this guide, we cover everything home buyers need to know about rebates and how to maximize savings in Florida.
What is a Home Buyer Rebate?
A home buyer rebate is when a real estate agent gives a portion of their commission from the home purchase. Some companies offer a varying percentage, while others refund a set amount regardless of the real estate transaction.
How Do Home Buyer Rebates Work in Florida?
When you buy a Florida home, your real estate broker is paid a commission by the seller. The real estate commission paid is a percentage of the total purchase price, split between the seller’s agent and the buyer’s agent.
However, many savvy home buyers seek brokers that share real estate compensation. While performing the buyers search, commission rebates provide an excellent incentive for a buyer to get the deal done and save money.
Typically, the rebate varies between 1% to 3% of the entire purchase price, and it can be used to cover the transaction closing costs or other expenses related to the home purchase. Not all real estate brokers offer rebates, so it’s important to do your own homework and find companies that are willing to do so.
Are Commission Rebates Legal in Florida?
Yes, under Florida real estate law (Part I Florida statutes), the home buyer can receive a rebate through brokerage compensation.
According to the statute, the sharing of commission from the transaction with full disclosure to interested parties isn’t a violation of chapter 475.
Therefore, it’s legal in Florida for a buyer’s agent to provide a commission rebate as long as proper disclosures are sent to all interested parties, including the buyer’s lender. That’s because if the buyer is obtaining a mortgage, that could impact the lender’s loan calculations, appraisal, or other risk metrics.
While the Florida statutes don’t specify which roles should be notified, you’ll want to inform every entity involved, such as the seller, the listing agent, attorneys, appraisers, realtors, and the title insurance company, that should know about the buyer agent commission rebate.
Under Chapter 475 and Rule 61j2 10.028, the compensation can’t be shared with an unlicensed person. This means you must only look for qualified companies that offer built-in rebate programs.
Are Commission Rebates Taxable in Florida?
Fortunately, a home buyer rebate isn’t taxable, according to the IRS. Since you’re not receiving any income with the commission rebate, it’s not considered taxable income. Essentially, it’s money you already had and is coming back to you when the transaction is completed.
However, rebates can affect your taxes on a cost basis. Since it lowers the cost of the home, it can directly impact your capital gains taxes.
The capital gains tax is the amount you owe on the increase in the property’s value.
So a lower cost upfront makes it seem like your house gained more value than it actually did, which increases the amount of taxes owed in the future.
Still, this property tax increase should be minimal, meaning the rebate is still worth receiving. Also, you can be eligible for various exemptions or tax reductions on capital gains.
How Much Can You Save with a Commission Rebate in Florida?
Home buyers can save potentially thousands of dollars on their home purchases. This depends on the structure of the rebate; the commission offered, and the purchase price.
Let’s say your broker offers a 0.5% rebate. Here’s what the savings would look like in this example:
- $300,000 – $1,500
- $600,000 – $3,000
- $900,000 – $4,500
- $1,200,000 – $6,000
You can use a rebate calculator to determine the exact figures.
Why Do Brokers Offer Rebates?
Buyer’s agents provide rebates on their full commission for many reasons, including:
- Remain competitive: Any broker that offers rebates will immediately stand out from their competition.
- Make the purchase more affordable: Closing costs are expensive. It’s common for the buyer to pay 3% to 5% of the sale price as their closing costs. On a $500,000 home, that’s as much as $25,000! An agent can do their part to help sweeten the deal and offset those costs.
- Attract new customers: Buyers are more inclined to work with a broker that offers a rebate. It will incentivize a buyer to stick with one agent throughout the process instead of using multiple agents when shopping for houses.
How to Negotiate a Higher Rebate with Your Florida Agent
Virtually no one will ever turn down free money. First, you’ll want to look for a qualified real estate company that already offers rebate programs.
Your odds of negotiating a higher rebate significantly improve if you’re:
- Purchasing in a neighborhood where the demand is low, and your agent doesn’t have many other offers
- Buying a high-priced property, since both the agent and seller will receive a large payout.
- Working with a new agent who finds it difficult to find new clients.
- Buying and selling a property with the same broker, so they’ll receive both commissions.
When negotiating, you want to maximize your odds by showing them the rebate is worth their time.
- Use the same broker to sell your property: The agent will earn a commission on both transactions, so they’re more willing to provide a discount.
- Do some legwork for your broker: If you’ve done some of the work by finding the property you’d like, all they need to do is make an offer.
Save On Your Next Florida Home Purchase
A real estate commission rebate could potentially save you thousands of dollars, especially for offsetting closing costs or receiving cash back.
Buyer agent rebates and cash-back refunds are becoming increasingly popular. It’s free money in your pocket, so as a home buyer, you should be seeking out opportunities.
If you’re seeking a rebate on your next home purchase, look for a top-rated agent who can help you offer these cash-back opportunities while also providing outstanding services like making a competitive offer and walking you through inspections, paperwork, and negotiations.
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